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What's a good program to convert large mpg files to small avi files?

VirtualDub. Its free and supports reading of MPEG1 video files (what VideoCD and nearly all MPEG files you find on the net are) and is able to do many types of filtering and transforms on the video. For MPEG2 (DVD) you are better off with programs like Flask or using DVD2AVI alongside VirtualDub (a bit more complicated but more flexible in what can be done).
 
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